Jump to content
House Price Crash Forum
acidreign

Interest Rates Could Rise Sixfold In Three Years

Recommended Posts

I wonder if what's going on here is that the BOE want two contradictory things - the want low IRs, but they also want people to borrow as though there were high IRs (i.e. cautiously and modestly).

Basically, they want to recapitalise the banks via low IRs, but discourage unsustainable lending due to cheap credit.

Share this post


Link to post
Share on other sites

Bank of England issues warning as British economy grows faster than any other developed nation

http://www.telegraph.co.uk/finance/bank-of-england/10691297/Interest-rates-could-rise-sixfold-in-three-years.html

So a piece to be taken seriously or just seasonal regurgitation to try and give savers some more false hope?

The 2,5 year swap rates do show an interest rate uplift. But the BoE is the last people you can trust a forecast to. Having never actually managed to predict a single number correctly either with inflation or the crisis, they are professional economic politicians who don't really say anything at all whilst they open and close their mouths. In the background they fix LIBOR and allocate funding for lending to repair bank balance sheets - their interest in the "real" economy is real but they don't really wield any power to actually shift rates - the market does that for them and then they follow. If there was another crisis in the next 3 years you can bet your hat they would just change their forecasts again and blame it on "the weather" or "structural changes" etc...

Share this post


Link to post
Share on other sites

The 2,5 year swap rates do show an interest rate uplift. But the BoE is the last people you can trust a forecast to. Having never actually managed to predict a single number correctly either with inflation or the crisis, they are professional economic politicians who don't really say anything at all whilst they open and close their mouths. In the background they fix LIBOR and allocate funding for lending to repair bank balance sheets - their interest in the "real" economy is real but they don't really wield any power to actually shift rates - the market does that for them and then they follow. If there was another crisis in the next 3 years you can bet your hat they would just change their forecasts again and blame it on "the weather" or "structural changes" etc...

China, emerging markets, the euro etc.

The Clown School in Threadneedle Street will never be short of excuses.

Share this post


Link to post
Share on other sites

I wonder if what's going on here is that the BOE want two contradictory things - the want low IRs, but they also want people to borrow as though there were high IRs (i.e. cautiously and modestly).

Basically, they want to recapitalise the banks via low IRs, but discourage unsustainable lending due to cheap credit.

Oh, f*** the banks. i would like to see some real capital investment in productive industries - and that means getting rid of the banks in their current form and keeping at least some interest rates low, or at least offsetting interest on the right sort of borrowing with tax breaks.

Share this post


Link to post
Share on other sites

A six-fold increase in the base rate would make it 3% which is lower than the historical norm. Somewhere in the 5% to 8% window is what is needed.

But over what time frame/period do you define 'historical norm'?

My understanding is that, other than perhaps exceptional short periods of time such as war/major political strife, the sort of interest rates you allude to only began to become normal some time after WW2 ?

I recall, vaguely, reading/seeing that interest rates back in the 1700's and 1800's were typically in the low single digits. Anyone confirm this?

Presumably, if indeed so, this reflected the lower economic growth of those times? Now that the world is apparently/supposedly moving into an era again of lower growth then perhaps rates in the low single digits will again become 'normal'?

Just sayin.....

Edited by anonguest

Share this post


Link to post
Share on other sites

I recall, vaguely, reading/seeing that interest rates back in the 1700's and 1800's were typically in the low single digits. Anyone confirm this?

Yes, but when you use gold or silver as your money inflation is zero and interest rates commensurately low.

Pieces of paper require higher rates to hold value.

Share this post


Link to post
Share on other sites

The link below gives a chart of historical interest rates going back to 1694 and it looks like an average of 4/5% was consistent upto about 1932 then there was a 20 year long period of rates at 2% (1932 to 1952 - including WW2) before they climbed upto 17% in 1980 and then declined to the current 0.5%.

http://

www.theguardian.com/news/datablog/2011/jan/13/interest-rates-uk-since-1694

From that it does look as if when interest rates go above the 3/4% level then they could very easily and extremely quickly go upto about 6% or even 10%.

That's probably one reason why the BoE is trying to suggest that 3% is going to be a peak - rather than just a staging post on the way to much higher rates, rates that might be at least twelvefold or even twentyfold+ higher than the current rate.

Edited by billybong

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   212 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.